New forces ranging from persistently depressed crude-oil prices to growing government climate-change polices are making Canada’s National Energy Board alter its forecasting approach, officials said. NEB, which has issued forecasts every 2 years since 1966, plans to update its Canada’s Energy Future 2016 (EF 2016) report in November and adjust some of its methods to reflect rapidly changing influences, Energy Integration Director Abha Bhargava indicated.
“Unprecedented environmental policy changes have taken place in the last year at the provincial, national, and global levels,” she said during a Mar. 2 discussion of the latest report at the Center for Strategic & International Studies. “If this momentum continues, we feel the energy future will be very different from what we present here.”
Bhargava said other uncertainties include Organization of Petroleum Exporting Countries members’ decisions to not reduce production in response to falling crude price, a historic global climate agreement last fall in Paris, several new provincial governments’ climate-change policy moves, the US ending its crude-oil export ban after 40 years, and US President Barack Obama’s rejection of the proposed Keystone XL pipeline’s cross-border permit application and imposition of his Clean Power Plan.
EF 2016’s other key findings in its forecasts through 2040 included:
• Energy production will rise faster than energy use in its reference case, and net energy exports will increase.
• Future oil and gas production levels will highly depend on prices, “which are subject to considerable uncertainty.”
• Without development of additional pipelines, crude production will rise less quickly but continue to increase.
• LNG export volumes will be an important Canadian gas production growth driver.
• Canada’s total energy use, including for energy production, grows at similar rates in all EF 2016 cases, and greenhouse gas emissions related to that energy use will follow similar trends.
EF 2016’s six reference cases capture uncertain related to prices, oil pipelines, and LNG exports, said Bruce Van Sluys, NEB market analyst. “We assumed transportation would be constrained with no new pipelines being built,” he said. “We also assumed that crude-by-rail would be an incremental transportation option, with most shipments headed for the US Gulf Coast.”
Rail shipments could reach 1.2 million b/d by 2040 under this constrained production case, while crude production would be 500,000 b/d than the forecast’s reference case, Van Sluys said. “We had lots of discussion about whether rail could reach that level,” he said. “Canada essentially has the capacity to load the crude it produces. Physical capacity, such as whether we have enough tracks, is less certain.”
Bhargava said, “The train tracks don’t stop at the border. Canada is looking hard what the US is doing in terms of tank car design and other requirements.”
Gas is one of the fastest demand growth fuels over the projection period, including more LNG exports, Van Sluys said. “Much of the new production will be tight gas, particularly from the Montney formation in northeastern British Columbia,” he added.
Matthew Hansen, who was coproject manager in EF 2016’s preparation with Van Sluys, said all of its reference cases project more fossil fuel which implies growing GHG emissions. “That makes government policies more important,” he said. “Overall, about 60% of Canada’s electricity is generated by hydropower. Most plants that are being retired are coal-fired, many of which are in Alberta, where the new government has pledged to close a lot of its thermal plants by 2030. There’s also long-term interest in carbon capture and storage.”
‘Time of great uncertainty’
Renewable sources, such as wind and solar power, and natural gas are the biggest growth areas, Hansen said. “Lots of wind generation is expected to spread across the country,” he said. “Clearly, it’s a time of great uncertainty in Canadian energy. Its future will not be determined by a single force, but the integration of many. Perhaps the next big thing will be climate policy.”
Beyond the update it plans to issue in November, NEB will issue provincial and territorial updates in April that it previously included only in its bigger forecast, Bhargava said. Other new reports will include weekly market snapshots as well as resource assessments and pipeline transportation reports, she indicated.
“We also may include a policy and technology scenario which we have not developed in the past, but believe will be more important in the future,” Bhargava said. “The whole focus will be on how to raise energy awareness and the inter-action of issues.”
Moderator Guy Caruso, a senior advisor at CSIS’s Energy and National Security Program who previously led the US Energy Information Administration, noted that chief executives from Canada’s two biggest heavy oil producers, Suncor Energy Inc. and Cenovus Energy Inc., said last week at IHS CERAWeek in Houston that they had $20/bbl operating costs and expected to increase production in 2016 and 2017.
Van Sluys said production impacts from depressed prices would be muted in the near term because already planned projects will provide momentum, but new projects probably will not be announced until prices have begun to recover. “Longer-term projects are more speculative,” he noted.
Contact Nick Snow at [email protected].